FLEX LNG announced that the Q2 2012 financial report was approved by the Board of Directors on 23 August 2012.
In the first quarter the front-end engineering and design work for a potential project in Papua New Guinea was finalised, although subsequently no further progress has been made on this project. The Company has in the current quarter made efforts to progress discussions with Samsung Heavy Industries in relation to the funds previously paid by the Company to Samsung including how they might be applied for alternative purposes. In principle, the Company has determined to pursue a plan whereby an amount of paid-in instalments, net of deductions, each to be determined, will be applied for the construction of LNG carriers and/or regassification vessels, but has not yet reached agreement on precise terms of such Alternative Deployment including the level of paid-in instalments that is to be carried over to the Alternative Deployment.
The cash balances at 30 June were $9.5m ($14.7m) with $2.1m net outflow ($8.2m net inflow) in the quarter and $5.2m net outflow ($4.8m – net inflow) year to date. In the six months in 2012 the operating cash outflow was $5.2m (principally the operating loss, non cash items and working capital movements).
The loss before tax was $2.2m ($11.6m) in the quarter and $3.9m ($15.4m) year to date, with a year to date retained net loss of $3.9m ($15.4m). In the current quarter there have been reduced staff costs. In the year there have also been a credit of $1.2m on forfeited share options (2011: $1.6m share option charge) and 2011 included a $7.8m financing charge related to the share option provided to IOC and PACLNG.
In the 2011 statutory accounts, the Group recognised an impairment write-down on the new build assets. The Company currently expects to have greater clarity as to the carrying value as negotiations evolve with Samsung. The amount of capital transferred for Alternative Deployment will depend on a number of factors that are not directly under the control of the Group (including the commercial terms for the Alternative Deployment options).
Outlook, Financing and Risks
In the event that Samsung and FLEX LNG agree to pursue an Alternative Deployment, the Company expects to consider a number of financing alternatives for raising working capital and instalment requirements; this will depend, among other things, on the number of vessels ordered, the debt equity ratio, level of instalments available for redeployment, economic terms of utilisation, final capital cost and market conditions. In the meantime, based upon current levels of cash utilisation, the Company believes that it will have sufficient working capital to last into 2013.
In relation to Samsung there can be no assurance that agreement will be reached on the Alternative Deployment or that it will be reached in a manner that is favourable for the Company. In the event no agreement is reached with Samsung on the Alternative Deployment, the Company has initiated steps to prepare for alternative options and therefore is also evaluating the need for and timing of any additional working capital requirements.
In all cases where the Company may require additional funding, there can be no assurance that such funds may be raised on terms that are reasonable, if at all.
The Board believes the going concern position and risks remain both as described in the 2011 statutory accounts and as summarised by this Q2 2012 financial report, including note 2.
LNG World News Staff, August 24, 2012